by Caroline Gabriel, ReThink Wireless
The fight over Nortel’s assets is heating up, with private equity group MatlinPatterson Global Advisers, as expected, mounting a counterbid to that of Nokia Siemens for the CDMA and LTE businesses. Far more perplexing, though, is the fact that RIM says it is interested in Nortel’s wireless infrastructure assets (though as reported yesterday, the BlackBerry maker claims it is being blocked by Nortel from bidding against NSN).
Barring some outburst of patriotism and a desire to keep Nortel Canadian, what could RIM want from getting into infrastructure (especially as the most obvious attraction for the patent-hungry firm, much of the LTE IPR, is not included in the deal agreed with NSN)?
It would gain the scale of a larger business, but although it would become the world’s second largest CDMA vendor overnight, this is a declining market under pressure from the Chinese suppliers, and one in which RIM has no expertise. It could be looking to push its business further towards a patent licensing model, and so could acquire Nortel’s considerable IPR assets (especially if it were to agree to include the LTE patents), justifying the price on those alone and then selling off or closing the hardware activities. Or it could be hoping to buy debt free, profitable businesses at a bargain price and selling them on later at a better price, perhaps to a vendor, such as ZTE, that might encounter political obstacles to bidding directly.
All this is pure speculation, and RIM’s shares fell on investor confusion at the company’s statement of interest in Nortel, though some analysts could see benefits – notably, according to a research note from Scotia Capital’s Gus Papageorgiou, the Ottawa plant and engineers, and attractive deferred tax assets of about $6.2 billion (as of March 31), most of them in Canada.
RIM says it is willing to pay about $1.1 billion for Nortel’s CDMA and LTE businesses and “certain other assets”, topping the NSN and MatlinPatterson figures of $650 million and $725 million respectively.
In a statement, Nortel said it was disappointed that RIM issued a press release and said the device maker had not previously objected to the procedures established by the bankruptcy court for the auction on June 30.
RIM submitted a letter asking to be a qualified bidder on June 15, said the statement, and since then: “Nortel has diligently attempted to work with RIM on acceptable confidentiality terms relating to Nortel’s intellectual property assets, but RIM refused to comply with the court approved procedures.”